Enforcement delayed to May

Officials seek to give retailers more time to comply with rules

The state Department of Revenue announced Thursday it is delaying enforcement of its controversial changes to the state’s sales tax collection rules from March 31 until at least May 31.

Officials hope the added months will give retailers time to comply voluntarily with the drastically different system and give the General Assembly more opportunity to weigh in when the session convenes in January.

Thursday’s news was met with quick relief from small-business owners such as Peter Novak.

Novak, whose Longmont artisan jewelry business RockHill Designs does business in multiple states, said the rules, as written, are “impossible in some ways” to comply with. His bookkeeping software keeps track of sales based on ZIP code, but even addresses in the same ZIP code can have different tax rates in Colorado.

The regulations, which took informal effect Saturday, require all in-state and out-of-state businesses that ship taxable products to buyers in Colorado to assess, collect and remit sales taxes based on each buyer’s address. It’s a dramatic shift from the way many Colorado retailers did business: Collecting taxes on shipped goods based on the jurisdictions they share in common with their customers, such as the state of Colorado or special taxing entities that cover large areas, such as RTD.

The state isn’t abandoning the new rules. Michael Hartman, executive director, said the Department of Revenue wants businesses with the capability to follow the new rules to do so.

The new approach was designed in part to level the playing field among in-state businesses selling the same products, and with out-of-state retailers and ecommerce companies that, de-

spite Colorado’s “Amazon tax,” could simply leave their customers having to pay sales taxes to the state at the end of the year.

The rules have been met with concerns, including how much it would cost local small businesses to upgrade bookkeeping software and the time it would take to assess taxes for the state’s 344 taxing jurisdictions — a patchwork of cities, counties and special districts that combine to create 683 unique tax rates.

One of Novak’s chief concerns is whether or not he will need to obtain sales tax licenses for each of Colorado’s 71 home-rule cities that collect their own taxes — including Denver, Fort Collins and Colorado Springs — in addition to the single license he has for the state and the jurisdictions for which it handles collections.

Kevin Bommer, deputy director of the Colorado Municipal League, emphasized last week that the new rules have no bearing on the 71 home-rule cities. If retailers were shipping goods into those places, they should have had licenses and been paying taxes. But it’s clear many businesses were not.

“In my opinion, they need to have a single sales tax license for the entire state and one system for filing,” Novak said. “Hopefully, legislators will step in and truly simplify things.”

One legislator committed to simplification is Rep. Tracy Kraft-Tharp. The Arvada Democrat leads the bipartisan sales and use tax simplification task force. She is planning a bill that would allow the state to solicit bids from software companies that can provide a one-stop sales tax portal, and she has other legislation in mind.

Kraft-Tharp applauded the decision to delay enforcement of the rules. She said there are some retailers out there who don’t even know the rules have changed. “I have faith in Director Hartman that he is going to listen and work on making this an easier system,” Kraft-Tharp said.

Among the business groups that came out with concerns about the rules and the impact they could have on local business were the Colorado Chamber of Commerce and the National Federation of Independent Businesses.

The federation’s Colorado director, Tony Gagliardi, called the two extra months a “welcome holiday present” but expressed concern for what lies ahead when addressing the state sales tax system.

“Simplifying and harmonizing its sales tax structure is Colorado’s biggest public policy challenge by far,” Gagliardi said.